Secured Education Loan: Complete Student Loan Guide

Pursuing higher education can often involve costs that extend beyond tuition, including living expenses, travel, and other academic necessities. A secured education loan is designed for students whose families can pledge collateral, such as property, fixed deposits, or LIC/government securities. Since the lender's risk is secured, these loans are generally a safer choice.

Here's everything you need to know about secured education loans.

Key Features of a Secured Education Loan

Collateral Required

Students (or parents) must pledge an asset as security, such as:

• Immovable property (house, land, flat, etc.)
• Fixed deposits (with lien marked)
• Government bonds, LIC policies, or other approved securities

Lower Interest Rates

Because collateral reduces risk for banks/NBFCs, secured loans generally have interest rates between 8% and 11%, which is lower than those for unsecured loans.

Higher Loan Amounts

• Public banks: Up to ₹1.5 crore in some cases
• Private banks/NBFCs: ₹40 lakh – ₹1.5 crore, depending on collateral value and course/university

Longer Repayment Tenure

Secured loans allow tenures of 10–15 years, easing the EMI burden.

Processing Time

Since collateral verification and legal checks are mandatory, processing may take 3–5 weeks, which is longer than for unsecured loans.

Co-Applicant Requirement

Still required, but the collateral reduces the sole dependency on the co-applicant's income.

Aspect-wise Comparison 

Eligibility Criteria

While lender-specific rules may vary, most banks and NBFCs require:

• Age: 16–35 years
• Nationality: Indian citizens (NRIs supported in select NBFCs)
• Academic Record: Minimum 50–60% in previous qualifying exams
• Confirmed Admission: Must have admission into a recognised Indian or foreign university
• Course Type: Professional and recognised degree/diploma courses (MBA, MS, MBBS, Engineering, STEM, etc.)
• Collateral Ownership: Student/parent/close relative must own a valid, marketable asset

Loan Amount & Coverage

Loan Range

• Public Sector Banks (SBI, Bank of Baroda, Union Bank)
• ₹7.5 lakh without collateral; up to ₹1.5 crore with collateral
• Loans follow the IBA Model Education Loan Scheme
• Private Banks (Axis, ICICI, HDFC, Kotak)
• ₹40 lakh – ₹1 crore secured, depending on collateral value
• NBFCs (Avanse, Auxilo, InCred, HDFC Credila)
• ₹50 lakh – ₹1.5 crore, higher flexibility for overseas education

Expenses Covered

Like unsecured loans, secured education loans usually cover the total cost of education:

1. Tuition Fees
2. Examination, library, and lab charges
3. Hostel/rent + food expenses
4. Travel expenses (one-way airfare)
5. Books, laptops, equipment
6. Student insurance premium

Coverage Differences:

• Public Banks: Typically cover tuition + 15–20% living expenses
• Private Banks/NBFCs: May cover up to 100% of tuition + living costs

Interest Rates on Secured Education Loans

• Public Banks: 8% – 10.5% p.a.
• Repo Linked Lending Rate (RLLR) + small spread
• 0.50% concession for female students (in most PSUs)
• Private Banks: 9% – 11% p.a.
• Flexible, linked to university ranking and collateral type
• NBFCs: 10% – 12.5% p.a.
• Slightly higher, but covers broader costs and allows larger loans

Factors Affecting Rates:

• Value and type of collateral
• Co-applicant's income and CIBIL score
• University/course reputation
• Country of study

Repayment Terms

Moratorium Period

• Course duration + 6–12 months grace
• Many banks require simple interest payments during the study period
• Some NBFCs allow a complete moratorium with interest capitalisation

Loan Tenure

• PSU Banks: Up to 10–12 years beyond moratorium
• Private Banks/NBFCs: Up to 15 years, depending on the amount

Prepayment/Foreclosure

• Allowed without penalty (as per RBI guidelines)
• Early repayment saves substantial interest

Documentation Required for a Secured Education Loan

Student Documents

• Aadhaar, PAN, Passport, photos
• Academic records (10th/12th/degree marksheets, entrance scores)
• Admission/offer letter
• Fee structure

Co-Applicant Documents

• ID & address proof
• Income proof: Salary slips, ITRs, Form 16, or business docs
• Bank statements (6–12 months)

Collateral Documents

• Property papers (title deed, sale deed, tax receipts, encumbrance certificate)
• Valuation and legal opinion reports (arranged by bank)
• For FD/Govt securities: Deposit receipt/LIC policy bond

Note: Collateral documentation is the primary difference between secured and unsecured loans, which can result in increased processing time.

Major Lenders for Secured Education Loans

Public Sector Banks

• SBI, Bank of Baroda, Union Bank
• Up to ₹1.5 crore with collateral
• Interest: 8%–10.5% p.a.
• Slower but cheaper

Private Banks

• Axis, ICICI, HDFC, Kotak
• ₹40 lakh – ₹1 crore secured
• Interest: 9%–11%
• Faster, digital-friendly processing

NBFCs

• Avanse, Auxilo, HDFC Credila, InCred
• ₹50 lakh – ₹1.5 crore
• Interest: 10%–12.5%
• Full cost coverage for overseas education

Lender Comparison Table 

Conclusion

A secured education loan is the most cost-effective and reliable option for students whose families can pledge assets as collateral. With lower interest rates, higher sanction amounts, and longer repayment flexibility, they are particularly suited for those pursuing expensive courses or universities abroad.

However, the process is longer and involves property/legal checks. Students must ensure collateral documents are in order and carefully compare lenders to balance the sanction amount, rate, and processing speed.